Commodities Trader Trafigura Reports Record Year in Oil and Metals

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(Bloomberg) --

Trafigura Group Ltd. reaped record profits from oil and metals trading this year, helping the commodities trader start paying down its heavy debt load and clean up its balance sheet.

Gross profit from oil trading surged to a record $1.7 billion in the year ended Sept. 30 as the Singapore-based trading house exploited price swings and a strong position in U.S. oil and LNG exports. Metals and minerals matched last year’s performance in what Chairman and Chief Executive Officer Jeremy Weir called a “knockout year” for trading.

The strong trading results gave Trafigura the cash needed to tackle its debt burden, which has been criticized by short-seller Iceberg Research, and softened the blow of asset writedowns. The company cut the value of its investment in an iron ore port in Brazil, fuel distribution business Puma Energy and zinc smelter Nyrstar.

Commodities Trader Trafigura Reports Record Year in Oil and Metals

Another sign that Trafigura is tightening its purse strings: employee share buybacks, the principal way the firm returns capital to its shareholders, fell to the lowest in at least eight years.

Commodities Trader Trafigura Reports Record Year in Oil and Metals

The trading house is already off to its best-ever start to a fiscal year, said Chief Financial Officer Christophe Salmon. He expects Trafigura’s equity value, which rose by about 9% to $6.8 billion during the year, to continue increasing.

“I’m expecting the equity base of Trafigura to go through the $7 billion bar in the course of 2020,” he said in an interview.

The CFO expects the trading house to tap the debt markets again in 2020, probably through the sale of so-called Panda bond denominated in Chinese yuan or a perpetual bond.

Financial figures:
  • Net income fell 0.5% to $868 million, the lowest in nine years.
  • Total debt fell 4% to $31 billion.
  • Adjusted debt, which strips out inventories that can be easily sold as well as cash and securitized receivables, dropped 12% to $5.3 billion.
  • Earnings before interest, taxes, depreciation and amortization rose 24% to $2.13 billion
  • Gross trading margin climbed to 1.7% from 1.3%
  • Adjusted debt to equity fell to 0.78 times from 0.97 in 2018
Commodities Trader Trafigura Reports Record Year in Oil and Metals

Other highlights:

  • CEO Weir expects Trafigura to come under more pressure on environmental, sustainability and governance issues
  • Oil trading volumes increased to about 6.1 million barrels a day from 5.8 million
  • Singapore-based Ken Loughnan was appointed Trafigura’s global head of coal and iron ore. He will take over from Julien Rolland, who remains on the management board as head of bulk minerals and power and renewables trading

©2019 Bloomberg L.P.

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